23 Mar

House prices 'fair at present'

House prices 'fair at present'

The current level of UK property prices is about right, an analyst has said.

New Star Asset Management chief economist Simon Ward told the Daily Telegraph: "According to my calculations, house prices are now pretty much at fair value."

He added: "If you look at the rental yield from UK property, it is equivalent to the price-earnings ratio for the equity market."

This, Mr Ward said, is about 3.6, which matches the average annual yield dating back to the 1960s, having dropped to 2.8 per cent when the recent housing boom was at its peak.

However, he stated, price trends tend to "overshoot" and for this reason there will be further falls to come.

Other economists also told the paper they expect further reductions in house prices.

According to the most recent Land Registry figures for England and Wales, the average price in the year to January 2009 fell by 15.1 per cent, with that month seeing a drop of 0.8 per cent.
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